Over a period of years, Engineers' salaries have increased at a rate of 8.5% per year....

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Question

Over a period of years, Engineers salaries have increased at a rate of 8.5% per year. If inflation has been 5.5% per year, w

Answer 1

Answer #1

Real Rate Of Return Formula:

= ( 1 + Nominal rate) / ( 1 + Inflation Rate) - 1

= ( 1 + 8.5%) / ( 1 + 5.5%) - 1

=( 1.085) / ( 1.055) -1

= 1.0284 - 1

= 0.0284

Or

2.84%

Hence, answer is option ( C).

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Answer 2

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